Rising housing prices and inflation since 2020 have brought attention to the adequacy of the Basic Allowance for Housing (BAH) for military personnel. The authors of this report assess the adequacy of BAH and the BAH rate-setting methodology from the standpoint of Army personnel, in the context of recent changes in the housing market.

Reassessing the Basic Allowance for Housing for Army Personnel in a Rapidly Changing Housing Market

Beth J. Asch, Jason M. Ward, Samuel Absher

ResearchPublished Jan 27, 2025

Rising housing prices and inflation since 2020 have brought attention to the adequacy of the Basic Allowance for Housing (BAH) for military personnel. The authors of this report assess the adequacy of BAH and the BAH rate-setting methodology from the standpoint of Army personnel, in the context of recent changes in the housing market.

The authors first assess the BAH methodology by considering the housing choices made by Army personnel and whether soldiers are making choices consistent with the way the allowance is set. They then assess the adequacy of BAH and the housing procured by members by using the 2017–2021 American Community Survey data to assess the extent to which the housing expenditures of active duty soldiers are comparable with those of income-matched civilians and civilians with comparable demographic characteristics. They also assess the extent to which there are observable differences between soldiers and civilians in neighborhood amenities across six exemplar installations. Finally, they assess the extent to which the BAH methodology adequately captured changes in housing prices, particularly given the dramatic increases in both rents and home sale prices in the years since the start of the coronavirus disease 2019 (COVID-19) pandemic.

Key Findings

In many ways, BAH is generally adequate for Army personnel

  • The current BAH methodology allows members to procure housing that is at least as good (in expenditure terms) as civilians with comparable incomes. On average, active duty members spend more on housing than civilians who are comparable in terms of income and in terms of demographic characteristics.
  • Neighborhood amenities vary considerably across Army installations, though the location amenities achieved by soldiers through their housing choices are broadly similar to the amenities experienced by civilians in the same location.
  • The definitions of military housing areas and the zip codes included in military housing areas are generally accurate in terms of where members choose to live.

The BAH methodology could be improved

  • The housing profiles that the U.S. Department of Defense (DoD) assigns based on grade and dependent status do not reflect the housing choices made by members. Members' housing choices differ across locations and differ from those of similar civilians. This suggests that DoD's housing profiles may need to be adjusted and perhaps be region- or location-specific to reflect the housing stock available to members in different areas, though additional analysis would be needed to assess housing stock in each area.
  • The BAH rate-setting methodology does not appear resilient to rapid and dramatic changes in the housing market, as occurred during the pandemic: BAH rates did not increase as dramatically as either rental rates or housing prices from 2020 to 2022.
  • A substantial, though minority, share of service members report dissatisfaction with BAH.

Recommendations

  • DoD should investigate the feasibility and desirability of using housing profiles in setting BAH rates that are region- or location-specific and better reflect the housing choices of comparable civilians and the housing stock available in different regions of the country.
  • The Army and, more generally, DoD should investigate further why a significant fraction of personnel express dissatisfaction with BAH.
  • DoD should consider using demographic characteristics rather than income to define comparability with civilians in the BAH methodology.
  • DoD should identify ways to improve the resiliency of the BAH methodology when the housing market is changing quickly and dramatically, such as occurred during the COVID-19 pandemic and thereafter.

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Asch, Beth J., Jason M. Ward, and Samuel Absher, Reassessing the Basic Allowance for Housing for Army Personnel in a Rapidly Changing Housing Market. Santa Monica, CA: RAND Corporation, 2025. https://www.rand.org/pubs/research_reports/RRA2412-1.html.
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This research was sponsored by the Assistant Secretary of the Army (Manpower and Reserve Affairs) and conducted by the Personnel, Training, and Health Program within the RAND Arroyo Center.

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